Ryanair's Strategic success


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Ryanair's Strategic success

  1. 1. http://www.radarvirtuel.com/
  2. 2. History Ryanair (1985) Scheduled passenger airline service from Waterford to London-Gatwick 15 seater turbo prop Full service conventional airline Leasing three different types of aircraft 1986 Dublin - London for £ 95 (Aer Lingus/BA charges £ 209)
  3. 3. 1990’sThe company continued to grow, but costs started to go out of control. In 1989, they had 4 different types of planes, 350 staff, 600,000 passengers but were £20m in the red.
  4. 4. What did Ryanair do? - No frills airline - Reorganised the fleet of planes- Reorganised the pricing structure
  5. 5. September 2009Ryanair says farewell to Manchester(9 out of 10 flights have been cancelled due to a dispute about landingfees)
  6. 6. www.ryanair.com13.10.10 RYANAIR ANNOUNCES CLOSURE OF MARSEILLE BASE 4 AIRCRAFT, 13 ROUTES, 200 JOBS LOST AT MARSEILLE, AS AIRCRAFT AND JOBS SWITCH TO SPAIN AND ITALY Speaking today in Marseille, Ryanair’s Michael O’Leary said: “We are very disappointed at this decision by the French authorities to initiate proceedings against Ryanair’s base in Marseille, which complies fully with EU regulations for mobile transport workers. These are not French jobs, but rather Irish jobs on Irish aircraft, which are defined by EU regulations as Irish territory. All of these people pay their tax and social insurance, in accordance with EU regulations, in Ireland and they remain fully tax compliant.
  7. 7. Ryanair’s PhilosophyRyanair promises: „low fares, good on- time record, few cancellations & few lost bags - if you want anything more- go away“Example of arrogance: “Will we give you a refund on a nonrefundable ticket because your granny died unexpectedly?” he asked. “No! Go away. We’re not interested in your sob stories! What part of ‘no refund’ do you not understand?”
  8. 8. *******236.20 EUR Taxes, Fees & Charges ********50.00 EUR Passenger Fee: Web Check in ********30.00 EUR Passenger Fee: Checked Bag(s) ********50.00 EUR Passenger Fee: Administration Fee Ryanair now *******891.10 EUR Total Paid“ No-frills“ strategy, reduce as much costs as possible, few or no customer serviceBiggest „Low Fare“ airline within Europe32 bases  800+ low fare routesOperating in 26 countriesConnecting 146 destinations
  9. 9. Production process Input Throughput OutputRaw material price goes up (input).Price of product goes up (output).Ryanair adopts the concept of allocative efficiency
  10. 10. Latest Developments in Ryanair (2005 - 2010)Personnel are not allowed to charge up their mobile phones at the office Personnel have to pay for their own uniform, food and (educational) courses If the passenger wants a certain seat then she/he has to pay for it. Ryanair has asked Boeing to study the option of “standing’ places on the planePer June 2010 ther e will be vending machines on board (to reduce cabin personnel) Extra baggage will cost Euro 20.- in the future Onboard toilets will be installed with coinslots
  11. 11. Strategic Positioning?Strategic?Positioning?
  12. 12. Strategic => Strategy “The direction and scope of an organisation over the long term, which achievesadvantage for the organisation through its configuration of resources within a changing environment and to fulfil stakeholder expectations”
  13. 13. PositioningThe way the product is defined by consumers on important attributes. => the place the product occupies in consumers’ minds relative to competing products
  14. 14. A Positioning Strategy =Concerned with creating and maintaining distinctive differences that will be noticed and valued by customers
  15. 15. Passenger costs of landing on Schiphol (2008) - Landing € 4.06 - Noise markup € 1.30- Navigation costs € 2.42- Passenger service charge € 13.46 (point to point)- Security € 17.47 (point to point)- Fly tax € 11.25 (point to point)- Passenger service charge € 5.65 (transit)- Security € 9.79 (transit)- Fly tax € 0 (transit)- Total amount for point to point - €48.96- Total amount for transit - € 22.22- => Price bundling
  16. 16. Strategic Positioning:Is concerned with the impact the external environment, internal resources/competences and expectations/influence of stakeholders have on strategy
  17. 17. What changes are going on in the environment and how will they affect the organisation and its activities? (opportunities and threats -provide a view of the key environmental impacts on the organisation)
  18. 18. What are the resources and competences of the organisation and can these provide special advantages or yield new opportunities? (strenghts and weakness –strategic capability– provide a view of the internal influences and limitations on strategic choices for the future)
  19. 19. What is it that the stakeholders aspire to, and how do these affect what is expected for the future development of the organisation?
  20. 20. Expectations Case 2 & Theory Resources& & Purposes The Competencies Environment Strategic PositionsCorporate Strategic Strategy into level Organizing Choices Actionstrategies Development, Managing Business directions & Change Enabling level Methods strategies
  21. 21. Low Cost Carriers and Flag Carriers 2010 Ryanair 72 million passengers Easyjet 49 million passengers KLM 21 million passengers Air France 50 million passengers Lufthansa 90 million passengers
  22. 22. Airline to halve Newquay flights Ryanair says 100,000 fewer people will come to Cornwall Low cost airline Ryanair is halving the number of flights to and from Cornwall in protest at the county councils new passenger surcharge. The airline claims that the £5 per person charge is a "draconian anti-tourist tax". Airport owner Cornwall County Council said the levy of up to £5 on all departures was needed to ease its losses of more than £1m a year.
  23. 23. Criticism over Ryanair terror ad The ad appears in a number of national papers An advert for low cost airline Ryanair which refers to the London bombings has received almost 200 complaints. It features Winston Churchill saying: "We shall fly them to the beaches, we shall fly them to the hills, we shall fly them to London!" The Advertising Standards Authority has received 192 complaints that it was crass or offensive and is considering whether to investigate. But Ryanair said it was stimulating the tourism market after the attacks.
  24. 24.  Budget airlines attack fee rise Increases in airport charges could help fund a new runway Budget airlines Easyjet and Ryanair have condemned a planned increase in charges at Stansted Airport in Essex. Luton-based Easyjet and Ryanair, who say they account for about 80% of Stansteds passengers, said the charges are set to rise by almost 300%. This comes despite the British Airports Authority (BAA), which runs Stansted, seeing its profits rise by 19%,
  25. 25. M. O’Leary“Any fool can sell low airfares and lose money! The difficult bit is to sell the lowest airfares and make profits.If you don’t make profits, you can’t lower your airfares or reward your people or invest in new aircrafts or take on the BA and Lufthansa’s!”
  26. 26. Latest newsPer 1 january 2011 the German government has imposed a flight tax (8 Euro for domestic flights and 25 Euro for european flights).?As a consequence Ryainair has cancelled 13 flight routes from Weeze (Germany) and from other german airports.
  27. 27. Game theoryStrategic behaviour and GametheoryOligopolic marketsAirline market is an oligopolic market
  28. 28.  Relation to airline market• Competition would be suicide.• Ryanair searches for new markets(price,geographically)• Traditional airlines and other (big)discounters don’t have to be afraid.
  29. 29. Dominant strategy- optimal strategy no matter what the opponent does. Equilibrium (4,3)
  30. 30. Game theoryCore assumptionsI’m in the arena for my own benefitInterdependant relationship with other competitorsAware that we are dependant upon each other
  31. 31. The Rise of SkyEurope(what is more rational than a pricefighter in a low cost country)
  32. 32. The first price fighter airline in Central Europe 6 september 2001 Slovakia has their own air carrier
  33. 33.  6 September 2001 – SkyEurope Airlines was registered 11 September 2001 – World Trade Centre in New York became a heap of rubble The biggest crisis in the airline industry followed How would you feel standing in the shoes of C. Mandl and A. Skowronek?
  34. 34. Good idea to stopSave yourself going bankrupt Save your name Try again in 5 years time
  35. 35. The 11 Sept. attacks were a blessing in disguiseAeroplanes became cheaper to buyPilots were cheaperSlots were available at the main European airportsABN Amro wanted to finance SkyEurope
  36. 36. SkyEurope takes off 13 FEBRUARY 2002
  37. 37. What was happening in the “air transport” industry Aeroplanes became cheaper (supplier power) Pilots became cheaper Slots were available at international airports like Schiphol and Orly (competitive rivalry) Demand diminished due to fear of flying (buyer power) Rail, ship and road transport grew (substitutes)
  38. 38. Threat of Entry (barriers) Economies of Scale – decline in unit cost of airtransport as the absolute volume per period increases Product differentiation – being the first, brand identification, customer loyalty Capital Requirements Switching costs – one time costs facing the buyer of switching from one supplier’s product to another’s Access to distribution channels Cost disadvantage independant of scale – locations, govt. Subsidies, experience curve Government policy
  39. 39. Why start in Slovakia? after the split of Tsjecho-Slovakia in 1993, there was no national airline this meant no competition in the market (easy startup) there were no connections with main European hubs like Amsterdam, London and Paris no connection between Bratislava and Kosice (2nd city) while there was a demand Bratislava is 50 km. From Vienna (big flow of customers from Austria)
  40. 40. Kondratieff Curve